Precious metals were down for the week as the US dollar and US treasury yields continued to climb. Oil saw gains this week on the back of political unrest.
The gold price was down for the week thanks to a rising US dollar that was supported by US benchmark yields hitting a 7-year high. The yellow metal dipped down on Friday (May 18) morning, nearing its lowest level this year.
As of 8:39 a.m. EST on Friday, the precious metal was trading at US$1,286.50 per ounce – down almost US$36.00 from this time last week. Gold is on track to experience its biggest weekly decline since early December of last year due to a steady dollar which held an almost five-month peak on the back of the benchmark US Treasury yield topping a seven-year high.
“The 10-year US yields put the dollar on a firm foot and put pressure on metals and gold,” said a Hong Kong-based trader.
He added, “some risk-on sentiment in markets today was also adding pressure [to gold].”
The yellow metal could see increases next week due to geopolitical concerns regarding the US and China.
On Thursday (May 17), US President Donald Trump stated that China had become “very spoiled” in regards to trade with the US.
“Failure of the US to reach any trade deal with China, as Trump has already indicated that there may not be a favourable outcome, could stimulate some demand for gold,” said Naeem Aslam, chief markets analyst at Think Markets.
Much like gold, silver was also down for the week, taking hits from the strong greenback triumphant US Treasury Yields.
“Precious metals are trading flat on COMEX today. We expect prices to trade range bound for the day, as the dollar and US bond yields held firm near their recent highs,” said Brokerage Nirmal Bang Securities.
The white metal was headed for a weekly loss Friday morning.
As of 9:49 a.m. EST, silver was trading at US$16.38 an ounce.
Rounding out the week in metals is copper, which fell for the first time in three weeks, trading at US$3.10 per pound as of 9:54 a.m. EST.
Copper declined on the back of uncertainties over the outlook for global growth and the strength of the US dollar this week which also weighed on prices.
“Right now we are in a bit of a vacuum, trying to figure out the direction of global growth,” said Danske Bank analyst Jens Pedersen.
“We have seen some softening of [manufacturing data] of late, so the question is whether it was just a soft first quarter or whether we are heading for a more mature cyclical downturn,” he added.
Pedersen also commented on the uncertainties surrounding the ongoing US-China trade dispute and the dollar outlook.
“If the dollar continues to rise, which we don’t expect, it would usually take its toll on commodity prices,” he said.
Meanwhile, oil climbed on Friday, heading for its sixth straight week of gains.
According to Reuters, oil climb due to strong demand, looming sanctions on Iran, plummeting Venezuelan production and Nigerian disruptions, as Saudi Arabia moved to satisfy supply concerns.
“Since last month, Venezuela’s production decline, Trump’s Iran sanctions decision, a new disruption in Nigeria, and anecdotal evidence from a new round of producer earnings require a price forecast revision,” the British bank Barclays said.
The bank is predicting that oil with average prices of US$70 per barrel for Brent this year and US$65 a barrel for 2019, up from previous estimates of US$63 and US$60 respectively.
As of 10:05 a.m. EST, oil was sitting at $71.60 per barrel.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.